2004 Shareholder Letter

Date: February 28, 2005 Author: Warren Buffett Company: Berkshire Hathaway

Overview

2004 net worth increased $8.3 billion or 10.5% (S&P 10.9%), falling just short of the index. Per-share book value reached $55,824 — a 21.9% compound annual return over 40 years.

Key Points

Struck Out on Acquisitions

"I didn't do that job very well last year. My hope was to make several multi-billion dollar acquisitions that would add new and significant streams of earnings to the many we already have. But I struck out."

$43 billion in cash at year-end — "not a happy position."

The "35 Years of Normal Returns" Illusion

"In one respect, 2004 was a remarkable year for the stock market... If you examine the 35 years since the 1960s ended, you will find that an investor's return... from the S&P has averaged 11.2% annually... But if you look for years with returns anywhere close to that 11.2% -- say, between 8% and 14% -- you will find only one before 2004."

In other words, "normal" returns of 8-14% almost never occurred in 35 years!

Why Most Investors Failed

"Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns... An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous."

Famous Quotes

"Run your business as if it were the only asset your family will own over the hundred years."

Related

• letter-2003 — Previous year
• letter-2005 — Following year
• warren-buffett
• compounding